LINK to article at ICEAW.com
3 September: selling an accountancy practice is always a difficult decision, but once the choice is made how can you maximise the value of your firm? Practice owner and author Della Hudson outlines several measures to help potential sellers.
Even in today’s uncertain economic landscape, accountancy practices remain fairly marketable entities. While there are many reasons for this, one of the main factors is they use similar processes to produce an end product that is in demand.
That being said, the price paid for a practice can vary significantly. Before selling my former practice back in 2017, I took a number of steps to ensure I got the best value possible from the sale – which I’ve outlined below. The most important thread running through the whole of this piece is as follows: if you ever want to sell your accountancy practice, it needs to run independently of you.
Accountancy firms are traditionally valued as a multiple of the gross recurring fees (GRF) retained after you have departed the business. Increasing the value of your business can be achieved by:
- Increasing recurring fees by growing your business
- Increasing the multiplier by making your business more desirable through automation and systemisation
- Increasing retention by making the business run independently of you.
For the business to run well without you at the helm, you will need to have procedures in place to ensure that everything from accounts preparation to onboarding and even answering the phone is done to the same high standard, whether you are there or not.
Good, written procedures will ensure that any suitably qualified person should be able to replicate your work. Procedures should be written and kept up to date. This means that even if somebody is having a bad day, they will be able to follow the instructions so their work is unaffected.
All workflows should be documented so that another accountant can follow what has been done. This means that the new buyer will be able to follow your workings and the reasons behind any decisions that you have taken. If you have a team, then good documentation of their work will be a huge asset when working remotely, part-time or covering holidays.
Very few clients are alike. Whilst you should have a general accounts production procedure, you will probably still need to record the peculiarities of each individual client.
Automating some of your manual activities will increase the multiplier you are likely to sell for. Even if you don’t want to stick around for the next phase of Making Tax Digital, a firm which is MTD ready will fetch a better price. Nobody will want to have to introduce MTD at the last minute if you haven’t prepared (or sold) in plenty of time.
If done well, using automation also makes you less dependent on staff who may make errors on data entry, so the standard of work should increase.
Removing yourself from the day-to-day work will make sure that everything carries on as usual after you have gone. Recruiting a good team will allow you to focus on growing and improving the business ready for sale.
Recruiting the right person is important but training will be much easier and faster with your written procedures.
If you are out of the day-to-day business then there still needs to be some control over the quality of work output. If you are currently checking every piece of work then you may need to rethink. Does everything need to be checked and, if so, does it need to be checked by you? Many things just need a second pair of eyes or a simple checklist.
The Acid Test
If your business truly works independently of you, then you should be able to take a holiday with no regular communication with the office. By all means, take your mobile in case something urgent crops up but if you are unable to go away for a week or two without checking emails or messages then you still have work to do to optimise your business for sale.
For more information about selling your accounting and/or tax practice, contact me at:
Eric J. Gall